WASHINGTON – America’s trade deficit showed a bigger than expected improvement in February as the politically sensitive imbalance with China dropped to the lowest level in nearly a year.
The Commerce Department reported Wednesday that the deficit fell to $65.7 billion, a 4.2 percent decline from January’s record of $68.7 billion.
Even with the improvement, the February trade gap was the third highest ever. The deficit for the first two months of this year is running 13.5 percent above the pace in early 2005; last year, the U.S. deficit hit an all-time high of $723.6 billion.
Many analysts said the deficit probably would resume rising in the coming months, perhaps headed to another annual record.
“The trade deficit may have narrowed in February, but it is hardly clear that this is the start of a long downward trend,” said Joel Naroff, chief economist at Naroff Economic Advisors, a private consulting firm.
“The trend still points to a larger deficit in coming months, especially given the recent rises in oil prices,” said Nigel Gault, an economist with Global Insight, an economic forecasting firm.
Gault predicted that trade would subtract about three-fourths of a percentage point from overall growth in the January-March period. But he said he was looking for the economy to be growing at a solid pace of about 4.5 percent in the first quarter.
On Wall Street, the Dow Jones industrial average rose 40.34 points to close at 11,129.97 on Wednesday.
Critics of President Bush’s trade policies contend that the administration has failed to aggressively pursue unfair trade practices in other countries that contributed to the loss of nearly 3 million manufacturing jobs since Bush took office in January 2001.
Seeking to counteract these attacks, the administration has taken a get-tough approach with China, the country with the biggest trade gap with the United States.
U.S. trade negotiators struck a number agreements on Tuesday with China designed to boost U.S. exports. Bush has said he will raise one of the thorniest trade issues, China’s undervalued currency, when he meets next week at the White House with Chinese President Hu Jintao.
Hu plans to visit Everett and tour the Boeing Co. plant before going on to Washington, D.C.
The overall improvement in February’s trade deficit reflected a 2.3 percent drop in imports which fell to $178.7 billion, the second highest level on record but below the all-time high in January.
There were declines in imports of new cars and auto parts and various consumer goods including cell phones, furniture, stereo equipment and televisions. America’s foreign oil bill edged up a slight 0.2 percent to $24.6 billion as the price of crude oil rose.
U.S. exports fell by 1.2 percent in February to $112.99 billion, still the second highest level on record after an all-time high of $114.33 billion in January. Sales of computers, industrial machinery and American farm products were all down while exports of civilian aircraft rose.
For February, the deficit with China narrowed by 22.7 percent to $13.8 billion, the smallest imbalance since March 2005. The improvement reflected a sizable 19.9 percent jump in U.S. exports to China to $4.1 billion, the second highest level on record, led by big gains in exports of American cotton, soybeans and semiconductors.
Chinese imports to this country fell by 16.2 percent, led by declines in shipments of cell phones and computers.
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